KOMITE TETAP WARALABA DAN LISENSI KADIN INDONESIA
Menara KADIN INDONESIA 29th Floor, Jalan Rasuna Said X-5 Kav. 2-3
Jakarta 12950 - Indonesia
Ladies and Gentlemen,
As we know, the purpose of this meeting is looking for soul mates in franchise business, between US Franchises and Indonesian businessmen.
Therefore, allow me to give a brief overview on the latest franchise development in Indonesia marketplace.
At present, it is estimated – I say estimated because Indonesia does not have an official data based on a comprehensive survey on franchise businesses. There are about 1100 franchisors and licensors operating in Indonesia, consisting of 30% foreign franchisors/licensors and 70% local ones or the homegrown franchisors/licensors. Approximately, the total turnover is about US $ 11,6 billion. 60% of the turnover mentioned above, is contributed by the foreign franchises/licenses and only 40% by the local ones. Although the number of foreign franchises is lower than the local, however in term of sales the foreign franchises are higher than the local ones. According to the studies conducted by IFBM, the franchise/license industries in Indonesia contribute about 5% to the Indonesia gross domestic product.
The data mentioned above clearly shows positive prospects regarding the foreign franchise investment and development in Indonesia.
However, as the Chairman of KADIN’s Franchising and Licensing National Committee, I would like to appeal to foreign franchises to run a real franchise system by developing more franchised units rather than company owned outlets. I would suggest recruiting more entrepreneurs as your franchisees or licensees at the districs and municipals level in all over Indonesia. Franchise business has to trickle down and be beneficial to small and medium businesses at the areas mentioned above.
Based on the government rule on franchise (PP no. 42/2007), each franchise agreement is under the Indonesia laws. Therefore, Indonesia language is required to use in the franchise contract or agreement. Franchise offering has to be transparent. Each foreign franchisor must have disclosure documents which has been legalizef by a public notary and get a letter of reference from the Indonesian trade attaché. The document should be registered and give to franchisees 2 weeks before signing the contract/agreement.
The franchise regulation mentioned that foreign franchise must use raw materials and products made locally, as far as the quality requirements is met. The franchise agreement’s length of time is at least for 10 years and any agreement uniterally terminated must be based on “clean break” principle.
Indonesian Commission for the Supervision of Business Competition (KPPU), has issued the regulation that “post expiry non-competition clause” should not be in the franchise contract/agreement anymore.
“Post expiry non-competition” is a clause which requires that franchisee is prohibited to conduct/run the same or similar business for 1 year after commencing from the date of the contract/agreement ends/terminated.
For Indonesian businessmen wishing to invest in the franchise industry, they should remember and carry on the International Franchise Association motto, namely: “Investigate before Investing”. I really hope that “McDonald’s law case” in Indonesia is the first and will be the last. Therefore, I would like to emphasize, besides studying carefully about the market and financial matters, you should be smart and accurate regarding the legal aspects, particularly matters related to the franchise contract/agreement.
I do hope that today’s meeting will be productive and provides benefits to all parties involved.
Thank you.
November 13, 2011
AMIR KARAMOY
ChaIrman, The National Committee on Franchising
and Licensing of KADIN INDONESIA and Chairman of the Board of
Directors Indonesian Franchising and Licensing Society (WALI)
